Financing the corporations

The International Conference on Financing for Development has provided a depressing sign that even the United Nations has succumbed to the pressures of international capital vis-a-vis the peoples of the world.

FOR a while it had seemed that the United Nations provided some sort of alternative forum for those opposed to the current pattern of corporate globalisation. While the Bretton Woods institutions (the International Monetary Fund and the World Bank) have been clearly aligned on the side of private international capital for some time now, and the World Trade Organisation (WTO) has shown itself to be functioning in a similarly inequalising way, the U.N. and some of its organisations had appeared to be slightly more balanced.

After all, it was less than two years ago (in September 2000) that the U.N. General Assembly adopted the Millennium Declaration, which was - at least in terms of verbiage - a bold statement in favour of poverty reduction and greater equality. This Declaration collectively committed member-governments to work towards the following International Development Goals, to be reached as soon as 2015:

1. Reduce by half the proportion of people living in extreme poverty, those who are hungry and those who lack access to safe drinking water;

2. Achieve universal primary education and gender equality in education;

3. Accomplish to the extent of two-thirds, reductions in the rates of maternal mortality and in mortality of children under five;

4. Halt and reverse the spread of HIV-AIDS and provide special assistance to AIDS orphans, and

5. Improve the lives of a hundred million slum-dwellers.

These are very ambitious goals, and even if they are to be partly achieved during the proposed period, they require substantial allocation of resources. It was believed that governments of most countries, especially in the developed world, would not have made such tall claims if they did not have at least a degree of seriousness about these objectives. And few people assumed that the level of cynicism of the parties to the Declaration would be so high that they would discount all these goals almost immediately afterwards. Yet that is unfortunately what seems to have happened.

THE promises made by this Declaration meant that the subsequent decision to hold a major consultative process leading up to the U.N. Conference on Financing for Development (which was held in Monterrey, Mexico, over March 18-22) attracted a lot of attention and interest. Many progressive groups and people believed that this was an opportunity to force governments to commit themselves to programmes and policies that would at least halt, if not reverse, the inequalising effects of corporate globalisation.

However, it soon became quite clear that this was not the case. To start with, the consultations not only included institutions like the World Bank and the IMF but also representatives of international business, who soon came to dominate discussions much more than others who were involved, such as developing country governments and some civil society organisations.

The high-level panel which was set up to provide a report was chaired by Ernesto Zedillo, the unlamented erstwhile President of Mexico who presided over the infamous Mexican "Tequila crisis" in spectacularly incompetent fashion. It included several economists openly wedded to the neo-liberal economic paradigm, such as Robert Rubin who advised President Clinton, and our own Dr. Manmohan Singh, and the project director was John Williamson, formerly of the World Bank.

It therefore came as no surprise that the report, submitted in June 2001, was a document that could have been prepared in the corridors of the IMF or even the World Economic Forum, the platform for international capital. While ostensibly concerned with how to generate and mobilise resources for development, the report actually presumed that private capital was the only way this could occur, and devoted most of its attention and concern to discussing how countries could best attract such capital.

Therefore the principal recommendations were more in the nature of hectoring to developing countries about how they had to set their own economic houses in order: by ensuring sound "fundamentals" of the standard neo-liberal type; placing due emphasis on protection of property rights, going in for even more trade liberalisation; and so on. Of course, the report also mentioned that donor countries had to meet their target (declared more than two decades ago) of providing Official Development Assistance of 0.7 per cent of GDP, but for the most part the onus was clearly on the developing countries.

The Monterrey Consensus, adopted at the Conference, is obviously based on this report, but if possible it goes even further in terms of meeting the interests of international business and pushing the failed neo-liberal paradigm. While the leading action is identified as the mobilisation of domestic financial resources for development, the policies suggested are bound to cripple governments' ability to do so. There is stress on financial and trade liberalisation, both of which are known to reduce the revenue-raising capacity of the state.

As far as mobilising international resources of development is concerned, the focus of the Monterrey Consensus is on how to attract foreign direct investment and other private flows such as bank loans and portfolio investment. This is regardless of the fact that it is precisely such flows that have failed so far to provide the types of investment required for development, and have been responsible for the most devastating effects which have even reversed the development process, as most recently evident in Turkey and Argentina.

The other "engine of development", according to the Monterrey Consensus, is international trade, and therefore it proposes comprehensive trade liberalisation by developing countries. No matter that such trade has been responsible for deindustrialising large parts of the developing world and constraining development in general that it has meant huge terms of trade losses (amounting to many multiples of all form of capital inflow put together) for many developing countries.

Meanwhile, there is hardly any proposal that could be of some real use. There are no recommendations to control and regulate cross-border capital flows, which are now absolutely essential even to maintain stable international capitalism. Instead, the document harps on "corporate responsibility", hoping for their voluntary good behaviour, and "public-private partnerships" internationally, even though these really amount to making taxpayers pay for the generation of private profits. It is as if the scandal-ridden collapse of Enron, or the known cases of abuse of corporate monopoly power by multinational drug companies, had simply not happened.

The section on external debt relief - another crucial area where the action is required immediately - is remarkably general and non-committal, hardly going beyond pious platitudes to any meaningful commitments about actual debt reduction. Even the relatively innocuous proposal made by George Soros - of increasing the allocation of Special Drawing Rights of developing countries in an effort to increase their international liquidity - was thrown out of court by the U.S., which found that this was "not a promising path".

Indeed, so blatant is the Monterrey Consensus about the direction of its strategy thrust, that it has been widely welcomed by business groups. The International Business Forum expressed its satisfaction at the outcome. But even they had to point out that they had "hoped for even more emphasis on building local entrepreneurship" rather than relying so openly on foreign capital to come in and make good.

As if the adoption of this appalling "consensus" document were not enough, developing countries have had to suffer insult upon injury in the form of patronising offers to increase ODA. The U.S. has declared that it will increase ODA by $5 billion over the next three budget years, starting from October 2003. The highly self-satisfied tone with which this was announced concealed the fact that currently ODA from the U.S. amounts to only 0.12 per cent of that country's GDP, among the lowest in the world, and even this increase would take it up to only 0.18 per cent.

The European Union has announced that it will increase ODA from 0.33 per cent of GNP to 0.39 per cent by 2006, once again hardly enough to cause much celebration. Currently only five donor countries meet the 0.7 per cent of GDP goal that has been known for so many years. In any case, even such aid is bound to come with many adverse conditions attached: as President Bush declared, "Greater contributions from developed nations must be linked to greater responsibility from developing nations."

But citizens of many developing countries may feel that their real problem is not paucity of ODA, but rather the nature of their involvement with imperialism in the world economy, which is the real problem as far as the financing of development is concerned. This reduces their incomes through terms of trade losses, forces them to keep paying for external debt many times over which did not contribute to development in the first place, and prevents them from garnering resources domestically because of the need to attract and placate international capital. And so perhaps the best thing that donor countries, and other organisations such as the IMF and the World Bank and the WTO could do for developing countries would be not to offer them some more crumbs from the rich nations' table while forcing them into unequal economic relationships, but simply to leave them alone.