Trading on poverty

Issue: 107

Jacob Middleton

In 1980, median income of the richest 10 percent of countries was 77 times that of the poorest 10 percent. By 2002, this gap had increased to 122 times. The number of poor people rose between 1987 and 1998, and any gains in poverty reduction were ‘relatively small and geographically isolated’,1 with the eastern seaboard of China accounting for the bulk of recent improvements.

The age of neo-liberalism, emerging in the 1970s from the wreckage of post-war ‘Keynesianism’, has been one of massively increased inequalities and staggering levels of deprivation alongside equally huge flows of global capital and the transfer of enormous wealth to a tiny minority.

This global economy is policed by a combination of international bodies, comprising the old Bretton Woods institutions, the World Bank group and the International Monetary Fund (IMF), and the newer World Trade Organisation (WTO), which work closely together to regulate and enforce the complex relationships between trade, investment, and economic growth. These have been increasingly drawn under a ‘neo-liberal agenda’, described by Robert Wade as ‘deregulation, privatisation, flexibilisation – although not the elimination of agricultural subsidies or the lifting of restrictions on the cross-border movements of labour’.2 The ‘Washington Consensus’, as this apparently inviolable set of policies became known, demanded strict fiscal orthodoxy (ie balanced budgets and low tax levels on the rich), and a thoroughgoing commitment to the free market from impoverished Southern economies. Often this was administered in the bluntest form through the now-notorious Structural Adjustment Programmes, imposed by the IMF on debt-ridden economies to meet the demands of Northern banks, eager to squeeze interest payments from the poorest people on earth.

The situation has hardly changed, even though a supposedly less rigorous approach is now claimed to be in operation, with talk of a ‘multilateral’ and ‘consensus-based’ approach to development. IMF conditions still hang over governments like those in Brazil, Ecuador and many others.

h2. GATS and the WTO

The General Agreement on Trade in Services (GATS) has been in force since 1996, signed and sealed at the end of the ‘Uruguay Round’ of the General Agreement on Tariffs and Trade (GATT) talks that also created the WTO. GATS sits alongside two other major agreements: TRIPS on ‘intellectual property’ (patents and copyrights), and TRIMS, covering investment measures. Like them, it is explicit in its commitments to a neo-liberal economic order. It is designed to facilitate the opening of markets for services, with penalty clauses and sanctions potentially enabled against governments found breaching GATS regulations.

The rules of the agreement are little more than a list of ways in which signatory governments should not interfere with the market. Article XIX commits governments to ‘achieving a progressively higher level of liberalisation…[and] increasing the general level of specific commitments undertaken by Members’.3 This makes it unique among WTO treaties in expressly calling for a continual expansion of its powers.

The vision behind the document is that the large numbers of excluded services will be gradually reduced through negotiating rounds, bringing wider and wider zones of the economy into the free market. It is of particular concern for two reasons. First, because the adequate provision of services is essential for economic development – from necessities like electricity or clean water, to health and education. Insisting on the private provision of such vital services can be, and often has been, little more than a licence to extort for larger firms. Water companies have been particularly notorious with their attempts to significantly increase the bills paid by their often extremely poor customers in the developing world. Second, because the open-ended and expansionary nature of the GATS, combined with the sectors it covers, ensures it reaches far further into public life than conventional trade agreements. It necessarily dictates a future course of action for governments, severely restricting their decision-making powers, and so has serious consequences for democracy. Governments’ abilities to regulate multinational corporations, in particular, are severely curtailed.

The WTO was established in January 1995 as a replacement for the earlier GATT negotiations. GATT talks had been taking place in a series of lengthy ‘rounds’ since 1947. These rounds of meetings were designed to enable countries to bargain over access to each others’ markets; for relationships between the developed North and the developing South, it was envisioned that ‘special and differential treatment’ would apply, in which Southern economies were allowed preferential access to the North, without needing to reduce their own tariff barriers. This reflected a common view of economic development at the time, in which under-developed countries could build up their industries behind ‘tariff walls’, until they were able to compete with developed economies in the North.

The WTO significantly altered this situation. ‘Special and differential treatment’ was redefined as ‘merely allowing developing countries longer adjustment periods in which to implement neo-liberal policies’.4 The pressure from Northern multinationals, banks and governments has been to make these ‘adjustment periods’ as short as possible. The WTO has teeth: by imposing fines and other penalties on member countries, it attempts to enforce the rules it has devised. They bite, however, far more convincingly against smaller economies, less able to circumvent or ignore WTO rules if needed.

The WTO is theoretically a neutral, ‘rules-based’ and multilateral body at which trading partners collectively agree on the common good for the world economy. After all, the neo-liberal catechism tells us that freer trade benefits everyone: so who could possibly object? Clearly, many do. Aileen Kwa suggests that it is the WTO’s lack of formal internal structures that most aid the interests of the powerful.5 ‘Consensus’ is manufactured through an unseemly combination of arm-twisting, bribery and outright bullying. Negotiations at the WTO have until recently been dominated by the notorious ‘Green Room’ meetings. The larger member economies would meet in private – sometimes with carefully selected smaller nations – agree policy among themselves, and then present these faits accompli to the rest of the membership.

Anger over this process was one of the major factors behind the developing countries’ walk-out at the Seattle WTO meeting in autumn 1999. The walk-out, encouraged by the thousands of demonstrators outside the conference and divisions between the US and the European Union, brought about the collapse of the WTO’s negotiations. The organisation has still not managed to recover, and the 2003 talks in Cancun were broken up by the G20 group of larger developing nations. They walked out after it became clear that the ‘Quad’ economies – the US, Japan, EU and Canada – would not budge on removing agricultural subsidies. The so called ‘Doha Development Agenda’, a face-saving exercised pushed through at the previous year’s WTO meeting, seemed to be barely worth the paper it was written on.

Further talks are scheduled for December this year, in Hong Kong. NGOs are already criticising attempts by the EU and the US to repackage their agricultural subsidies so they appear legitimate under WTO rules. The possibility of a further stalemate for the Northern ruling classes is high; disguised behind the fanfare for Brown’s plans for Africa is a frantic attempt to soft-soap recalcitrant Southern leaders into accepting neo-liberalism with a human face: slightly stronger words on poverty reduction, dubious commitments to increased aid, and, if all else fails, the hope of splitting and dividing the opposition within the WTO.

The emergence of a developing country bloc with sufficient power to disrupt the activities of the Quad has led some to believe that the G20 provides the key to ending the South’s many woes. Combined with the turn towards bilateral trading agreements among the larger developing nations – such as those conducted between Venezuela and China – and the reappearance of nationalist leaders in the developing world, like Kirchner in Argentina, high hopes are being placed in the construction of an anti-neoliberal bloc, uniting Southern ruling classes, workers and peasants against the North’s neo-liberal predations. In reality, the leading G20 powers operate in the interests of agrarian and industrial capitalists inside their countries (for example, the sugar, beef and soya beans barons of Brazil, Argentina’s big agrarian capitalists, South Africa’s white wine producers, the Birla and Tata family business empires in India, China’s multimillionaires). These want to advance their own positions within capitalism’s international pecking order, which means pushing for rules that only allow them to break into advanced country markets. Success in building their exports will often be at the expense of the mass of people in their own countries – as when increased beef and soya exports from Brazil involve trying to take land off the country’s indigenous people and peasant farmers.

It can also mean trampling on the interests of countries that are poorer than them – as The Observer reported at the time of Cancun, ‘Many African countries believe that the G23 is primarily concerned with access to western markets while small countries like Malawi, which has torn down all barriers to outside trade, are more preoccupied with protecting their own fragile businesses’.6

From this brief narrative, we can see at least three different solutions to the difficulties faced by developing countries: the one favoured by the neo-liberal hegemony, now given a fresh, new ‘poverty-reducing’ gloss by such figures as Jeffrey Sachs;7 the beginnings of a turn towards what was once known as ‘national development’ among the South; and the very faintest glimmerings of a radical, anti-capitalist path. Each of these needs to be assessed against the development of global trade in recent years.

h2. Trade in services and manufactured goods

Global trade expanded by about 6.5 percent a year over the 1990s, about twice as fast as the expansion in global output. In other words, the world economy was becoming increasingly biased towards international trade. Despite constant urgings by the WTO towards greater liberalisation, it is interesting to note that underdeveloped countries are among the most open to competition anywhere in the world. African economies are far more open to trade than developed. On average, exports account for 30 percent of African countries’ GDP, compared to 20 percent across the developed OECD nations.8

Trade in commercial services expanded faster still over the decade, growing from a small fraction to about one-fifth of global trade in 2003. However, after allowing for a considerably slower growth in the value of transport traded, growth in total services trade has been similar to that in manufactures and primary commodities. Global trade remains strongly biased towards the ‘tangible’ goods produced by manufacturing, mining and agriculture. Great efforts by institutions like the WTO to all but compel trade in services have had little impact on this overall pattern. It is therefore unlikely, given only average growth in services trade generally, that developing countries will benefit from moves towards further liberalisation.9

Well-known successes, such as the expansion of India’s business services industry through call centres and IT support, are not likely to be repeated in such global market conditions, since demand for services generally has not expanded by nearly as much. Encouraging developing countries to move into trading services, as is urged by the GATS treaty, is to encourage them into a zero-sum game, poorer nations being forced to compete against each other in low value-added service industries while leaving the fast-expanding sectors to richer, developed nations. For comparison, about half of world commercial services exports are accounted for by Western European nations. With the US and Japan, these countries entirely dominate the sector. China, the largest developing country services exporter, accounted for just 2.5 percent of the total trade.

Yet these developing countries are growing importers of commercial services. China recorded a deficit in commercial services trades in 2003, while even India managed only a tiny surplus over the year. The fastest growing imports are among those dominated by developed country multinationals: computer and information services, financial services, and insurance. Developing countries simply do not get a look in. The ongoing negotiations in GATS, where massive pressure is applied to Southern economies to deregulate and privatise, will simply create further opportunities for these multinationals in expanding markets, while exposing Southern economies to cut-throat competition in those growing less rapidly.

If we rule out a plausible, free-market path to development through services provision, we could turn instead towards the manufacturing sector. China is particularly heralded in this regard, manufacturing exports growing spectacularly over the last decade to make it the world’s third biggest exporter in 2004.10 This has not, however, been achieved by following the WTO’s preferred route; indeed, China only became a full member of the WTO in 2002, still strictly controls capital flows, centrally-manages a large chunk of its external trade, and maintains a strong system of state-owned heavy manufacturing industry.11 It is, additionally, impossible to separate China’s current account surpluses from the US’s burgeoning trade deficit: for as long as US consumers have access to easy credit, funded principally by East Asian investors, they can maintain high levels of domestic imports. The balance across the Pacific economy is precarious, however, and the weaknesses of the US economy are becoming increasingly apparent while there are many predictions that the Chinese economy is going to make a ‘hard landing’ from its runaway boom.

If we break down the growth of manufactured goods exports over the last decade, the biggest gains have been trade in office and telecoms equipment, which expanded at twice the average rate for manufactures. This industry now accounts for 12.1 percent of world merchandise exports. It is dominated by a few larger multinationals, overwhelmingly based in the North, and places high demands for capital and technological expertise on producers. Unprotected, and without substantial assistance, manufacturers in the great majority of Third World countries, especially in Africa, are ill-placed to compete. Areas where the less developed countries retain some comparative advantage – lower technology and labour-intensive sectors in the main – have expanded far less rapidly. Textiles and iron and steel products recorded below average trade growth in the 1990s, and showed a significant decline in their share of world trade over the decade.

For small economies facing a vast world market, it is the trends in growth elsewhere that dominate; they are, however, heavily biased against the less developed world. The neo-liberal strategy of removing barriers to trade and promoting exploitation of comparative advantages aims, at best, to promote the expansion of industries currently undergoing relative decline. At worst, the promotion of basic manufacturing locks less developed countries into intensively competitive, low value-added markets with the terms of trade shifting against them.

h2. Agricultural trade

Agricultural trade, by value, grew globally on average by 2.4 percent each year between 1990 and 2002. This is somewhat faster than over the preceding 20 years, but is noticeably slower than growth in manufactures and services. For less developed economies, the prospects for continued growth through agriculture are not promising.

Most African countries are dependent on primary commodity exports, in some cases exceptionally so: 18 states were dependent on three or less primary produce exports for 70 percent or more of their export earnings throughout the 1990s.12 With the share of agricultural goods in merchandise exports declining, economies heavily biased towards agricultural production become still more dependent on high and stable agricultural prices. In practice, primary commodities have experienced a long-term decline in their terms of trade relative to manufactured goods, extending over several decades [see Chart A]. This has discouraged investment while simultaneously exposing (especially smaller) producers to greater market risks.

More importantly, the structure of the agricultural trade itself is shifting over time. Exports of processed agricultural products grew significantly faster than other primary food exports, their share of agricultural trade rising from 42 percent in 1990 to 48 percent by 2002. For example, trade in beverages, which are considered to be 100 percent processed, recorded an above average expansion over 1990-2002, at 4.8 percent, while the trade in natural fibres, hides, and skins (considered to be entirely unprocessed) stagnated or even declined [see Chart B].

This pattern is almost certainly linked to the increased concentration of capital within agribusiness. Multinationals like Cargill and Monsanto have expanded horizontally by acquiring other businesses engaged in similar trades to themselves, and vertically by moving into different stages of the food manufacturing process. The attempt to patent crops, with which Monsanto is most closely associated, is one extreme end of this pattern, imposing direct control over the most elementary unit of production. Direct retail sales, at the other end of the agricultural business, remains largely in the hands of specialised retailers, themselves increasingly vast.

The further liberalisation of the agricultural export market is likely to benefit only the large agricultural multinationals able to exert increased control over almost the entirety of food production, distribution and marketing. They control the most lucrative, highest value-added stages of production, principally around canning and processing, and are steadily encroaching even on the activities of the direct producers. The capital and technological requirements for entering such production are prohibitive, especially if tariff liberalisation has removed an obvious source of revenues for less developed economies wishing to move into this industry. It is, in other words, a similar picture to that painted earlier for manufacturing and services industries, brightened only by a few highly exceptional relative successes,13 feted beyond plausibility by the WTO.14

This strongly suggests that so called ‘level playing fields’ in international trade, and even attempts to smooth out the bumps, are of no help to developing countries. In the first case, many biases remain in the legal framework beneath apparent equality; as we have seen, the WTO functions as anything but a gathering of trading ‘partners’, more as an assembly of Mafioso. Demands by the global justice movement to remove such overt biases, especially around subsidies for Northern agribusinesses, are wholly legitimate. But the problems for developing countries are far more pervasive than this.

As even Jeffrey Sachs has noted:

bq. If Europe cut back on its subsidies for staple crops (wheat, maize), the results for Africa could well be negative, not positive, since Africa is a food importing region… Africa will unambiguously benefit from liberalisation of trade in tropical products (for example, cotton, sugar, bananas), but subsidies for tropical products are only a small part of the reported $300 billion in artificial support for farmers in rich countries. In short, liberalise trade in agriculture but…the benefits will accrue overwhelmingly to the large food exporters: the United States, Canada, Argentina, Brazil and Australia.15

And, in a rare moment of honesty, the Commission for Africa recognises that freeing agricultural trade would probably lead to an increase in food prices – and hardship – in Africa in the short term, although insisting on long term benefits. ‘If substantial progress is made with agricultural liberalisation in the Doha Round’, it admits, ‘world food prices may increase in the short-term, and some African food-importing countries could face a considerable adjustment challenge’.16

None of this, however, has stopped the apostles of free trade declaring it the solution to world poverty, with the BBC news, for instance, proclaiming every move to liberalise trade as a ‘victory’ for the anti-poverty movement.

The structure of world demand and the inability to acquire capital and technological resources to compete on even a level playing field cripple the countries of the global South. We may stop bribing the referee, but expecting a single developing economy to successfully take on the developed world is like expecting an under-12s’ team to beat Arsenal.

h2. The many ‘achievements’ of neo-liberalism

Oxfam has produced convincing evidence to demonstrate that movements towards greater liberalisation are correlated with lower growth.17 Far from free trade and liberalisation automatically bringing economic growth, it is almost without exception the case that countries experiencing rapid growth and modernisation have done so under thoroughgoing protectionist systems: South Korea and Japan are good examples. The record left by three decades of continual appeals to liberalise and privatise, by contrast, is extraordinarily weak.

Meanwhile, the much-vaunted ‘trickle-down’ effect appears to be a ‘trickle-up’. It is held that privatisation and liberalisation will unleash entrepreneurial talent, enriching a few massively but eventually benefiting all. The opposite has occurred: the rich became richer, as we have seen; but poverty also increased. The UN Commission on Trade and Development, in a recent report, summarise their figures as showing:

bq. Poverty is increasing unambiguously in those economies that have adopted the most open trade regime and in those that have continued with the most closed trade regime. But in between these extremes, there is a tendency for poverty to be declining in those countries that have liberalised their trade regime to a lesser extent, and for poverty to be increasing in those countries that have liberalised their trade regime more.18

We have already noted that the most liberalised region on earth is sub-Saharan Africa. The appalling record there speaks for itself.

New Labour, trade and development

The manifest failings of neo-liberalism have led some to extended soul-searching. In recent years, critics such as Joseph Stiglitz, former chief economist at the World Bank, have emerged from inside the great global institutions to condemn past failures, and demand a new course.19 Yet what has emerged, among some of those most committed to the failed Washington Consensus, is a neo-liberalism, mark 2: plenty of breast-beating about the plight of the poor; targets and promises to end world poverty; but the same steadfast commitment to liberalisation and the tacit support for Northern multinationals. New Labour, as in so much else, has been a pioneer of the technique, developing its own international ‘Third Way’ very soon after arriving in office.

Margaret Beckett, the then trade secretary, made New Labour’s ambitions for the global South quite plain within months of Blair’s 1997 election victory. Writing in the Financial Times, she claimed New Labour would ‘continue developing the conditions, at home and abroad, in which British business can thrive… Britain’s businesses need to be able to trade throughout the world’s markets as easily as they can in home markets without facing high tariffs, discriminatory regulations or unnecessarily burdensome procedures’.20

Changes of ministerial personnel notwithstanding, New Labour’s commitment to full trade liberalisation has remained constant. Their July 2004 White Paper on trade re-stated Beckett’s ambitions, saying they would push ‘at the international policy level to ensure any distortions created by other government interventions are minimised so that the UK can compete in global markets’.21

The link between this free-market programme and supposed ‘development’ was made explicit by Blair himself, speaking at the World Economic Forum in 2000. Defying overwhelming evidence to the contrary, Blair told this august gathering of the self-confessed ‘global elite’ that ‘trade liberalisation is the only sure route’ to economic growth for developing countries.22

Blair’s brainchild, the Department for International Development (DFID), has adroitly promoted these interests, pushing further trade liberalisation under the guise of eradicating poverty. Clare Short made a now-notorious speech to business leaders, back in April 1999, bluntly stating the government’s case:

bq. The assumption that our moral duties and business interests are in conflict is now demonstrably false… I am very keen that we maximise the impact of our shared interest in business and development by working together in partnership… We bring access to other governments and influence in the multilateral system – such as the World Bank and IMF… You are well aware of the constraints business faces in the regulatory environment for investment in any country… Your ideas on overcoming these constraints can be invaluable when we develop our country strategies. We can use this understanding to inform our dialogue with governments and the multilateral institutions on the reform agenda.23

The DFID’s role in promoting a revised Washington Consensus could not be clearer. It has also acted as a support for Gordon Brown’s rediscovered plans for Africa. After promising debt relief at the G8 summit 1999, with further promises on poverty reduction at subsequent G8 jamborees, Brown is claiming, once again, that he has only the very deepest concern for the underdeveloped world, and Africa in particular. He and the DFID have assiduously courted some of the larger NGOs in raising support for a package of initiatives to be presented at this year’s G8 summit in Gleneagles. These include the International Finance Facility, the Commission for Africa and fresh attempts towards meeting the Millennium Development Goals target for aid and debt cancellation. The Make Poverty History campaign has been flattered with government time.

As Katharine Quarmby wrote in the New Statesman:

bq. Both Blair and Brown have been keen to be associated with Make Poverty History, using political events as a forum. When Bono spoke at last year’s Labour party conference, he congratulated the PM and Chancellor on their work for the campaign, dubbing them the ‘Lennon and McCartney’ of poverty reduction. Some groups involved in MPH were horrified. John Hilary, director of campaigns and policy at War on Want, was in the audience. ‘When Bono said that, many NGO leaders who were there put their heads in their hands and groaned,’ he recalls. ‘It’s just not useful, that kind of celebrity endorsement. In fact, it’s a killer blow for us. To see the smiles on the faces of Gordon Brown and Tony Blair! This is exactly what they want – they want people to believe that this is their crusade, without actually changing their policy.’ Oxfam’s Adrian Lovett admits: ‘It was a bit cheesy, but there were tough passages in the speech as well. You have to capture people’s imaginations.’
Part of the closeness is in the exchange of personnel. This is not new. Frank Judd, a former director of Oxfam, became a Labour peer and spoke for the party on international development in the Lords in the 1990s. But the links have become more intimate under this government. Shriti Vadera, who advises Brown on international development, is an Oxfam trustee. Justin Forsyth was director of policy and campaigns at Oxfam before joining the Downing Street Policy Unit to advise Blair on the issue. When Oxfam recently advertised for Forsyth’s successor, two of the four candidates called for vetting were either current or former special advisers. Vadera was on the interview panel. This process worries the likes of Mike Sansom, co-ordinator of the social justice organisation African Initiatives: ‘NGOs have been rightly critical of the revolving door between business and government, but the same has now become true of NGOs and government.’
Links are similarly friendly on policy. On issues such as trade, Oxfam’s position is much closer to the government’s than other groups. When it published a report three years ago that advocated liberalisation of markets in wealthy nations and identified market access as a key mechanism for eradicating poverty, the line was strikingly similar to Gordon Brown’s. Many NGOs were appalled, particularly as this was in the run-up to the crucial World Trade Organisation meeting in Cancun in 2003. Martin Drewery, head of campaigns at Christian Aid, explains: ‘The reason Oxfam got a bad press in the NGO world was not because anyone disagreed that northern markets should be opened, but it was not the most important thing – and in practice the richest countries would not grant that access unilaterally and poor countries would pay a massive price for it’.24

Covered by the fetching new wrapping is much the same neo-liberal agenda New Labour has always pursued. The appeals to ‘level playing fields’ are particularly alarming: development in the South requires as a minimum precisely the opposite of a level playing field. While New Labour no longer uses formal tied aid – aid given on the condition it is used to buy specific goods from the purchaser – its use of ‘globalised aid’, aid tied to more general liberalisation, is increasing (as Charlie Kimber shows in his article). Debt relief itself has become another stick to beat the Southern economies into neo-liberal line: the promise of debt cancellation is held out, if an economy liberalises on demand. Campaigners should categorically reject such formulae.

‘Fair trade’ and national development

Two alternative strategies have become popular within the movement. Sales of Fairtrade labelled products rose 51 percent over 2004 to £140m.25 The Fairtrade Foundation, responsible for administering the labelling system, aims to ensure a ‘fair and stable price’ paid to primary producers for their products as well as imposing strict environmental standards, and boasts of its success in promoting brand awareness and maximising revenues, while aiding poor farmers.

The scheme is becoming something of a victim of its own success, however. Multinationals like Nestlé, themselves responsible for the exceptionally poor conditions that rule Southern agriculture, are keen to move in on an expanding market. Those farmers taking part in a fairtrade marketing scheme may have some protection against the sudden fluctuations in price that mark the primary commodity markets. But the scheme offers little to the great majority who are excluded. The only hope for these is an expansion of the global market for the products they produce as result of rising living standards for the world’s poor as a whole, not just for a few select groups lucky enough to be contacted by fair trade organisations.

The poverty of millions of coffee farmers world-wide is the result of coffee output growing much more rapidly than the market for it ever since countries like Vietnam turned to coffee production. Yet there is no shortage of desire for people world wide to drink coffee. The trouble is that poverty in many countries in Latin America and the Middle East where coffee is the preferred hot drink are too poor to buy it at existing prices, let alone pay the higher price needed to overcome the poverty of the coffee farmers. Fair Trade, like charity, provides some relief for a few of the poor, but not any answer for the great majority. For that there has to be a transformation of the whole system in which the coffee producers live and work.

Gathering momentum is a distinctive shift towards a belief in what used to be known as ‘national development’. Schemes for ‘import substitution’, replacing imported goods with the same domestic commodities, rigorous systems of tariffs and quotas, and plans for centralised, state-led mobilisations of investment capital were all once dominant in intellectual circles in developing nations.
These fell away under the neo-liberal onslaught, but are currently enjoying something of a revival, in a new, ‘globalised’ form. The rise of the G20 especially, its cohesiveness in facing down the Quad nations and its use of bilateral trading agreements have all led to great enthusiasm for the creation of an alternative trading system among the developing world. Rather than national economic development, pursued through protectionism, this sees an internationalised version of the same as the route to economic growth and poverty reduction: larger developing countries are able to band together to exclude the developed, and so promote their own growth.

After nearly 30 years of neo-liberal hegemony, it is difficult not to see talk of protection and planned development as an advance. However, the weaknesses in this scheme reproduce those of its earlier incarnations, with some additional problems. The creation of stable and long-lasting trading blocs in the South is unlikely: not only are serious efforts being made to break up unity among Southern governments, with Brown’s plans for Africa leading the way the G20 ties together economies that are greatly dissimilar in terms of size, GDP per capita and so on, but rather too similar in competition over markets.26 The bloc is fundamentally weak. Only the exceptional political conditions have made it sustainable at successive WTO meetings.

More importantly, national economic development fell apart when faced with the immense task of raising more than a handful of less developed countries to compete on the world stage in anything beyond crude manufactured goods and primary produce. The technological and capital ‘bar’ for entry into the world market was set so high as to all but exclude most developing countries. Import substitution, for its part, was fatally weakened by the huge gap between cheap, higher-quality Northern imports and expensive, poorer-quality Southern competitors, particularly with the spread of technologies too expensive to develop except by the biggest states and multinationals. The relics of state-led manufacturing schemes littered across the global South are tribute to this; though we should always note that the neo-hberal alternative has usually proved to be markedly worse for large sections of the population.

The gap between North and South in general is now extraordinarily large. For a brief period, a small group of econonnes concentrating on export-led growth, clustered around South East Asia, were able to exploit relatively cheap capital and relatively simple technology to gain a foothold in heavy industries and some light manufactures: the Japanese shipyards, for example, expanded hugely from the 1950s onwards, under the careful direction of the Ministry for Industry and Technology. These footholds enabled further economic development to be achieved, though with enormous upheavals and at enormous cost. Since the Asian financial crash in 1997, growth has resumed in most of the so called ‘Tiger economies’, many of which now resemble the developed economies of the North— whether measured in GDP per capita, the composition of employment, or access to education.

Elsewhere, economic development has proceeded, if at all, in fits and starts. There are areas of economies like Brazil and India that are relatively developed, maintaining a range of employment reliant on substantial, modern infrastructure and significant economic integration with the world economy. However, the inability of capitalism to deliver anything approaching balanced economic growth, and its combined tendencies to under-supply infrastructure while over-supplying capital in a few industries, ave these areas as islands in an ocean of underdevelopment. India maintains both highly sophisticated, internationally-competitive service sector industries in some of its cities alongside incredible rural deprivation, and—ir. recent years—deindustrialisation in ‘rust belts’ previously dependent on heavy manufacturing.

There is no returning to the era of state-led national capitalist development. Attempts by the state in such countries to even out the process of economic growth have ended in failure. Where development does occur today, as in eastern China, it is by an untrammelled turn to the world market, the other side of which is leaving vast sections of the population in unending poverty. There is economic growth and the sacking of up to half the workforce in the old industries. There is the expansion of the cities and the search each year by tens of millions of people from the countryside for jobs in the cities which do not exist. But for the poorest countries in Africa, as in most of Central America, the Andean region of South America and the vast agrarian inland regions of South Asia, even this option is not on offer.

To claim that people can ‘lift themselves’ out of poverty through ‘enterprise’ and ‘trade’ if only a few hurdles are removed is to tell those who cannot afford shoes to pull themselves up by their own laces. It is asking Southern workers to sweat blood to compete, on under-capitalised machinery and limited technological resources, with workers in other Southern states as well as those in the North.

A systematic programme of planned, globalised economic development is achievable, but not under the competitive conditions imposed by the free market and regulated by the transnational institutions. It is necessary if we are not to abandon hundreds of millions of people to a grim economic fate, and if we are not to wreak immense environmental damage in doing so. The embrace of neo-liberalism by the elites of the South is an expression of the common interest they increasingly share with the ruling classes of the North in exploiting their own people, even while they argue over their small share of the spoils. By the same token workers and peasants in the South have a common interest with workers in the North in fighting this exploitation and breaking the system as a whole.


i: C E Weller, R E Scott and A S Hersh, The Unremarkable Record of Liberalised Trade’, International Development Economics Associates, February 2002.
2- RWade, ‘The Ringmaster of Doha’, New Left Review 2-2S (Jan-Feb 2O04).
3; WTO, General Agreement on Trade in Services, Article XIX.
4.- RWade. as above.
5: A Kwa, ‘Power Politics in the WTO’ (2002) at 2002/power percent20politics_final.pdf
6.- The Observer, 14 September 2003. A leader of the international organisation of peasants, Via Campesina, said at Cancun. Anyone who believes that the export of a ton more of soya from Argentina or Brazil saves a single child from death through starvation does not understand the dynamic of poverty’. Peter Rosset. La Jornada, 2 October 2004- This article contains a detailed analysis of the ‘betrayal’ of the poor countries by the ‘leading countries in the G20\ and especially by Brazil and Lula.
7: J Sachs, The End of Poverty (London
8: World Bank figures, quoted at /g8blairtrade. htm
9: Figures in this and following paragraphs taken from WTO, ‘World Trade 20O3’. See
^e/pr373-e.htm for summary.
IO: Exports at $583.1 billion moved just ahead of Japan for the first time, but remained below Germany’s $893-3 anal tne US’s $795 billion, as well as being only half the European Union’s exports to non-EU countries of $1,109 billion. See /2o78.html
II: Still more fanciful are those free-market apologists who presume a direct correlation between democracy and the free market. The Chinese Communist Party, after nearly 30 years of continual marketisation of its state-capitalist economy, shows no reat inclination to abandon its grip on political power. Indeed, given the great social strains unleashed by marketisation and rapid, geographically unbalanced economic growth precisely the opposite could be argued: only under a rigid system of political control are elements of the free market able to be successfully introduced.
12: R Bush, Undermining Africa’, Historical Materialism 12:4, pl77-
13: Chile, an economy that has successfully expanded its agricultural outputs at every stage of food processing over TQQO-2002. is often hailed in this regard.
14: Figures in this section are taken from the WTO report. ‘World Trade 2003’.
15: J Sachs, as above, p282.
16: Commission for Africa Report’, p284-
17: Oxfam, Rigged Rules and Double Standards: Trade, Globalisation and the Fight Against Poverty (London, 2002). figures 5.3, 5.4.
18: UNCTAD, ‘Least Developed Countries Report 2 00 2 : Escaping the Poverty Trap’, pi 15 at Idc2002p2ch3_en.pdf
19: J Stiglitz, Globalisation and Its Discontents (Harmondsworth, 2002).
20: Financial Times, Towards Full Market Access’, IOJuly 1997.
21: DTI, Trade and Investment White Paper 2004: Making Globalisation a Force for Good, Cmnd. 6278, July 2004, p6l.
22: Tony Blair, Speech to the World Economic Forum, 18 January 2000
23: Quoted in M Curtis, Web of Deceit (London, 2002).
24: New Statesman, 30 May 2005.
25= Financial Times, Big Groups Profit from Fairtrade’s Rising Sales’, 28 February 2O05.
26: A Narlikar and D Tussie, ‘The G20 and the Cancun Ministerial: Developing Countries and their Evolving Coalitions in the WTO’ (2004).