February 22, 2017

Does development create or mitigate poverty?

Does economic development reduce or increase poverty? Does it benefit the countries of the Third World or the corporations of the West? Is it irreconcilable with finite natural resources? Or would its opponents simply condemn billions to lives that are nasty, brutal and short? Clare Short and Teddy Goldsmith discuss.

Teddy Goldsmith is the founder and former editor of The Ecologist.

Clare Short is MP for Birmingham Ladywood. She was Labour’s international development secretary until her resignation over the Iraq war in May 2003.

Published in The Ecologist Vol. 35 No. 3, April 2005.


Dear Clare,

The economic development of the Third World got under way after the Bretton Woods Conference in 1944. The conference’s main object was to plan a post-war world economy that favoured the interests of the Western countries. This meant, above all, providing them with maximum access to an ever growing market for their exports and the requisite sources of cheap labour and raw materials.

Of course, this was precisely the goal of the colonial system in the late 19th century, as admitted by Cecil Rhodes. Under both regimes, non-industrial countries that were largely self-sufficient were turned into importers and exporters. Under the former regime they were forced to do so by the colonial powers. Today they are bound by World Trade Organisation (WTO) rules that force them to import highly subsidised food with which local farmers cannot compete. As a result, more and more of the world’s remaining 2 billion or so farmers seek refuge in hideously squalid slums.

WTO rules also force developing countries to export their food even in times of scarcity, as was the case under the colonial system. As a result, anything between 40 percent and 80 percent of their good agricultural land is already devoted to export crops. This condemns small farmers catering for the local population to eke out a precarious livelihood on marginal land that is soon turned into dust, forcing still more farmers into the slums. In this way, the domestic economy on which the bulk of small farmers, artisans, local retailers, etc, depend is sacrifi ced and there is a corresponding increase in poverty and malnutrition.

If we were really interested in fighting poverty we would preserve non-industrial countries’ domestic economies that cater for local people. Instead, development means replacing them with systems that cater, above all, for the insatiable wants of the rich industrial countries. Is this really the way to fight poverty?

 


Sincerely,

Edward Goldsmith


Dear Edward,

I am afraid you are wrong about the 1944 Bretton Woods Conference. It was focused on the post-war reconstruction and ending the policies that led to the depression of the 1930s. The British empire and all the other colonial regimes were still in place. India was agitating for independence, but had not yet achieved it. The International Monetary Fund (IMF) and World Bank were not designed to promote development in the poorer countries. That role evolved much later. Of course colonialism was exploitative. Access to raw materials for the industrialised countries was its raison d’être.

The WTO is something entirely different. It was established as recently as 1995 and, in my view, has created the possibility of agreement on fairer trade rules. Prior to 1995, trade rules were negotiated by the rich regional blocks (the EU, the US, Japan) and focused on reducing tariffs on manufactured goods, but did not challenge the distortions in agricultural trade that hurt the developing world.

The majority of the members of the WTO are now developing countries. This gave them the power to stand together at Doha in 2001 and insist that there would be no new trade round unless it was focused on making trade fairer for developing countries. The Doha round is still not complete, but everyone is now clear that improvement in trade rules for developing countries is the central issue. The WTO, which is a membership-based organisation that makes rules by consensus, provides the chance to change this. My view is that fair international rules on trade, environment, ending conflict, etc, are the only way to resolve the acute problems the world now faces. I believe properly regulated trade helps the poor.

On your proposals poor countries would live as we did before the Industrial Revolution, or as they did in colonial times, which means desperate poverty for all but the landowners. What we have to do instead is share access to development and modern technology and agree on rules that bind us all to equity and sustainability. This means that we in rich industrialised countries will have to stop being so greedy and consumerist.

 

Yours sincerely,

Clare Short


Dear Clare,

The Bretton Woods Conference in July 1944 was supposed ‘to focus on the post-war reconstruction’ of Europe, but the Marshall Plan took that on instead. The World Bank and the IMF were set up that year, the former to fund the physical infrastructure the Third World requires to sell off its natural resources and absorb our exports, the latter to tide Third World countries over in inevitable balance-of-payment difficulties. The General Agreement on Tariffs and Trade (Gatt) was set up in 1947, its object being to make sure that Third World countries did not spoil things by setting up import quotas and raising tariffs. Gatt was absorbed by the WTO in 1995.

Plans to set up these institutions, for these purposes, were already drawn up in the 1930s by the US Council of Foreign Relations. According to David Korten, the founder and president of the People-Centred Development Forum, the council’s members ‘were unified in their vision of a global economy dominated by US corporations’.

Agriculture was only brought into the purview of Gatt during the last round of negotiations (the Uruguay round). The object was not to protect the developing world from ‘trade distortions’, but to prevent it from feeding its own people in order to maximise corporate-dominated trade.

The WTO is far from ‘making rules by consensus’. Rules are almost entirely made by a closed body: the so-called ‘quad’ powers, comprising the US, Canada, Japan and the EU. At Doha, though ‘the majority of WTO members were Third World countries’ their leaders were nevertheless bludgeoned into accepting agreements that were totally contrary to their countries’ interests. It was only at the WTO ministerial at Cancun in 2003 that Third World countries finally revolted and refused even to discuss the shameful so-called ‘Singapore issues’, which would have further increased poverty and malnutrition among the already poor and malnourished.

 

Regards,

Edward


Dear Edward,

I am afraid you are simply wrong about the reason the IMF and World Bank were set up, but never mind. Readers can check the historical record for themselves.

But I am afraid you are also wrong about Gatt. It was set up after WWII to negotiate a reduction in the high tariffs on trade in manufactured goods which had been imposed during the 1930s by the industrialised countries against each other and thus deflated the world economy and generated the depression that led on to Hitler and world war.

Your basic argument does not need this historical distortion. In summary, it seems to be that trade is bad, particularly for developing countries. If this is your case, I disagree with you profoundly. You seem to think that if developing countries rely on agriculture all will be fine. This was the situation in Britain before the Industrial Revolution and most people were desperately poor. Developing countries need to be able to export their agricultural goods and to add value by processing so that they generate jobs and earn income to pay for the imports they need.

Asian countries have also used the availability of labour to attract manufacturing investment and massively reduce poverty. Africa’s comparative advantage is probably agricultural processing. This is why we need to implement the agenda agreed by the WTO ministerial meeting at Doha in 2001 and get rid of agricultural subsidies which lead to the dumping of cut-price food products in developing countries and thus undermine their agriculture. We must also get rid of the tariffs that rise when agricultural products are processed, thus keeping Africa underdeveloped.

 

Sincerely,

Clare


Dear Clare,

You seem to equate poverty with under-development, which implies that any development can eradicate it. The World Bank’s Multilateral Investment Guarantee Agency implies it too, or it could not classify as ‘poverty alleviation’ the guarantees it provides for such developments as the construction of the Acropolis/Citibank tower in the poverty-stricken Dominican Republic.

Your assumption even serves to justify the building of ever more large dams, though those already built have driven more than 40 million poor peasants off their lands – most of them into the most squalid imaginable slums.

The WTO’s Agriculture Agreement is also a vast development project, since it will allow the US’s agrochemical industry massively to increase its turnover by substituting itself for the bulk of the Third World’s 2 billion or so mainly subsistence farmers, who will also be condemned to slums.

You rightly believe that food-export subsidies should be abolished, and they may well be. But there are countless other less visable devices for making our exports unfairly cheap: the guaranteeing of investments by our agrochemical industry being just one of them.

The trouble is that development by its very nature must systematically substitute the artificial world of human artefacts for the natural world and our semi-natural agricultural lands from which our livelihood is ultimately derived. Thus Japan, Taiwan and South Korea, the countries in Southeast Asia that have developed the fastest, have done so at the cost of up to 55 percent of their cereal-growing land.

How much more land can they afford to sacrifice to the great god Development, especially as, with climate change, the main breadbaskets of the world, the Australian wheat-belt, the Canadian plains and the American corn-belt, are rapidly drying up? For me it is clear that if we want to eat we will have to forgo much development.

 

Sincerely,

Edward


Dear Edward,

I fear our correspondence is going round in circles. I equate development with having enough to eat, the chance to be educated, having access to healthcare, and being able to work, live with dignity, see one’s children grow up and have the chance of a fulfilling life.

I fear that your economic recommendations would deprive many millions of people of such a life.

 

Yours,

Clare

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