Conditional poverty reduction under the IMF and the WTO

Yash Tandon
Member, International South Group Network (ISGN)

What is the Distinguishing Character Of Our Era In History?

How do we understand this moment in History? What are the distinguishing characteristics of the era in which we presently live? What makes this period different from others through which humankind has passed?

Some people argue that the defining moment of the contemporary times is the speed with which we can now communicate with one another, that it is the information technology revolution that has shrunk both time and space. Of course information technology, of some form or another, has always been with us through time immemorial, but the quantum leaps by which it has developed over the last decade has transformed the global society fundamentally. There is now a qualitative, not just quantitative, difference in the manner in which information has transformed the livers of global societies.

To some extent this is true. Informatics has indeed transformed our lives. From the point of civil society it has enabled us to communicate globally as never before. Seattle would not have been possible without the E-mail and the Internet, to be sure. The civil society is now able to make direct inroads into those aspects of global governance and international relations that previously were the exclusive preserve of sovereign governments. Of course, one must keep the matter of technology in proper perspective. It is not the technology that has brought about this change; it is the use to which we in the civil society have made of technology. There is a growing awareness of the globality of our universe and the common responsibility that we all share for its continued maintenance and nurturing.

But no, the present day information technology, whilst revolutionary, is not the defining moment of our contemporary civilization. It is something else.

Still continuing on the technology path, some say that the future is likely to be shaped by the revolution in gene technology. In the changes that information technology has brought to the global society, you haven't seen the future yet. The future is with the gene technology. Information technology revolutionizes only the manner in which, and the speed with which, we communicate with one another. Wait until we have seen the full results of the gene technology, for that would revolutionize our very being, our very existence, how we look, how we think, how we relate to one another. If information technology was something external to us as human beings, the gene technology is something that can change what is internal to us. If information technology related to the work of human beings, the gene technology is challenging God's work. It can create life, which, we have hitherto come to believe, is the exclusive preserve of God herself. The gene technology offers a tantalizing prospect, as well as a scary one. Who knows what Frankenstein might emerge in the wake of manipulating human genetics? That is why society is not keen to let scientists apply the technology that created the artificial sheep to creating artificial human beings.

So, the defining moment of our civilization may well be defined by the genetic science and technology. The full potential wonders, and dangers, of gene technology are not allowed to manifest themselves by a questioning public worried by its more risky possibilities, and by even the scientific community, which is also not sure of the moral and spiritual implications of such a revolutionary technology.

The Distinguishing Character Of Our Era In History is its Cruel Absurdity

Leaving, for now, the marvels of gene technology for defining the distinguishing feature of a future global society, one would say that what distinguishes the present global society is the absurdity to which the inner logic of capitalism has driven our contemporary civilization. That is the defining moment of our epoch, its cruel absurdity that throws millions out of jobs into dire poverty and depths of despair on the one hand, and a hundred or so individuals whose income per year exceed the combined annual income of all African countries put together. What can be more absurd than that!

But the absurdity of our present epoch manifests in other fields too.

In the capitalist phase of our civilization, the dominant motivating force is profit. Global governance is ruled by profits. This is not an expression of reductionism. There are, of course, other aspects of globalism, such as art, music, culture, communications, football, Wimbledon Tennis, white water rafting, social welfare, acts of charity and writing novels. There are also large sections of societies that do not function in the market where profits rule. Nonetheless, as broad generalizations go, profits form the basis of contemporary global governance. It is also at the root of its pathological character.

Take global medical governance for example. In 1977, the WHO published the "Essential Drugs List" of some 306 drugs which, it said, "… should be available at all times in adequate amounts and in the appropriate dosage form." But the poor in the third world (and that means the majority of the population) wait for decades to have access to life-saving drugs, such as those against HIV/AIDs (for example), which is a deadly scourge in the South. A few large global corporations dominate the pharmaceutical industry, and they will not allow these 306 or so drugs to be marketed at prices affordable to the people. In South Africa in 1999 the Government introduced a system of compulsory licensing and parallel imports of patented drugs. But the multinational drug industry backed by the US Government used all the power at their command to block this action. In the world of global governance health is subordinated to the demands of profit, and protecting patents take precedence over protecting human lives. This is only one instance of the pathology of global governance.

In 1992, during the Earth Summit in Rio, many countries in the world signed the Convention on Bio-Diversity (CBD). It recognized the right of indigenous communities and sovereign nations to their bio-diversity. But this would have blocked the pharmaceutical multinationals' access to it. Instigated by them, the US and its allies in the West succeeded to push through the Trade-Related Intellectual Property rights (TRIPS) within the Uruguay Agreements that rule the World Trade Organisation (WTO). This effectively took away the rights of governments and communities recognized under the CBD (1). The companies secured the right under TRIPS to exploit biological resources wherever these might be. Countries that would forbid this are subject to sanctions by the Governments of countries where the big pharmaceutical companies originate.

As with medicine, so with the very essence of life giving stuff itself, namely food.
Food, in contemporary civilization, is only the medium through which to make profits. Though millions may starve, profits must first be made. So if profits cannot be made, food cannot be placed on the plate of the hungry. Charity and welfare institutions draw their reason for existence by the fact that the poor have no access to food and other basic needs for survival because they do not have the financial means to buy their wherewithal from the market. But why should it be like that? Why should it fall on welfare institutions to close the gaps left by the market? Why should it not be the most normal aspect of civilization that the basic needs of the people are satisfied by the core of the system rather than by its peripheral institutions, which is what welfare organizations are?

Would it help if all charitable and welfare institutions are closed down? Would this perhaps serve to put pressure on the core of the system to change itself so that the poor receive what they are morally entitled to receive within the mechanism of the system itself? Does the existence of charitable institutions make it possible for an utterly immoral system to survive by helping, though inadequately, to fill the gaping holes left by the core of the system?

That is a difficult question to answer. Probably the answer is that in the absence of anything else, and in the absence of a more just system coming into existence to replace the absurd civilization of today, it is better that we do have charitable and welfare organizations that fill the gaps left by the market. But, at the same time, we must, in all honesty, recognize the complicity of welfare organizations to enable the perpetuation of s system that has, at its core, become cruel and barbaric.

The contemporary civilization has become barbaric not only as between human beings, but also in terms of relations with other species of life. It has become wantonly destructive. It is a norm among predatory animals to kill only when in need for food; at some time in the historic past, humans also used to kill mainly for food. Hunting was part of food gathering. As our so-called "civilization" moved on, humans began to kill other animals for fun as well as for food.

Unlike animals, humans also destroy species that they do not eat. Thus, they kill weeds because weeds reduce the output of corn or wheat or what have you. They kill pests though they do not eat them. The wanton, and senseless, part is that the destruction has to be total. The cholera virus has to be annihilated for good, the cotton bollworm has to be eliminated permanently, and the stalk borer weed has to be destroyed forever. Animals have to be put into zoos and parks, crop varieties into gene banks and laboratories. None must have free existence except at the dispensation of humans. This is the anthropocentric part of global governance. And this anthropocentricity reaches its cruel absurdity when profit is its motive force.

Humans in the era of profit-motivated civilization have become more barbaric than animals. Unlike animals, humans kill competitors. Lions do not kill cheetahs just because both predate on giraffes. Humans kill other human beings as well as other species in competition for land, for forests, for cattle, for fish, for water, for space, for pleasure. Competition may have been the impulse behind the development of science and technology. But it is also at the root of the barbarism of human beings. Our present capitalist period is the most competitive and also the most destructive. Millions of species are destroyed every day. Millions of human lives are wasted away simply because they do not have the "market power" to buy food, shelter, clothing or medicines. Ours must be the most barbaric period of human "civilization" (2).

Natural species are destroyed and manufactured products offered in their place that yield profit to the capitalist. For the loss of the microbe that filters the drinking water is offered the manufactured substitute with its "more efficient" filtration technology. For the loss of natural nutrients is offered fruity vitamin supplements. However, consistent with man's anthropocentrism, nobody has replaced the sea snails on which the life of Borneo hooded tern had depended. There is no profit to be made out of the hooded tern; unlike humans the birds cannot buy sea snails from the market.

Much of the rise in consumer-product diversity is a direct result of the decrease in bio-diversity. Consumer-product diversity now far exceeds bio-diversity. 200 million new product options have been generated since 1993 in replacement of the millions of now extinct species (3). Half a century ago, Joseph Schumpeter had said that "creative destruction" was the necessary basis for the development of capitalism (4). If so, then its present phase is dominated by destruction of Nature and its substitution by profit seeking "creation".

Thus, the defining moment of our contemporary civilization is neither the information technology nor the potential that gene technology holds for the future. The defining moment is the cruel absurdity of the system that has profit, greed, and competition as its motivating force. In its time, this motivating force had certain progressive effects when it tore down the cruelties of the slave and feudal societies. But now capitalism has reached its zenith, its absurdity driven by its own inherent logic.

The World Trade Organisation and its Contradictions

It is in the above context that one must try to understand what the WTO is all about. It is about legitimizing a system that has become absurd and cruel, and in providing the mechanisms for putting that system on the ground. A lengthy discourse on this matter is not necessary; it is sufficient to draw attention to some of its salient features.

The WTO is sold to the people of the world as a "rule-based" system. It is argued that a rule-based system is better than anarchy. Indeed, in the abstract, between anarchy and the rule of law people would normally prefer the latter. But in the WTO, it is not a abstract issue. It is a concrete issue; it is a practical issue. The question is who makes these rules and for whose benefit?

The rules of the WTO are made, by and large, by the powerful trading nations of the international community pushed, behind the scene, by huge multinational corporations that are concerned, as we saw above, with maintaining their profits rather than human welfare. We already gave the example of the pharmaceutical industry. The Trade-Related Intellectual Property Rights, in my view, should not have been part of the WTO at all. It came there because of pressure from the Pharmaceutical corporations. And the effects of this so-called "rule-based system" is to put into danger the bio-diversity of the countries of the South and their food security.

Earlier we talked about the marvels and dangers of genetic engineering. As applied to agriculture it is now being pushed on to the WTO by food multinationals of countries coming from the so-called Miami Group, namely, the US, Canada, Australia, Argentina, Chile and Uruguay. They have been opposing the enactment of a bio-safety protocol aimed at providing a safety net against the dangers of bio-genetically modified foods. And indeed, the US is leading the campaign not to ratify the Bio-Safety protocol that was negotiated in Canada in January 2000.

If the application of bio-genetics on agriculture is not restrained, what possible dangers does that put the people of the world? As Via Campesina, a global network of the landless, said, "… the Genetic engineering will lead to rapid destruction of agricultural biodiversity, irreversible ecological risks, loss in food quality and safety, and further marginalization of millions of farmers." Via Campesina was protesting at the manner in which, at the Global Forum on Agricultural Research (GFAR) Forum held in Dresden (May 21-23, 2000), peasants and small farmers, who produce the bulk of the food for the poor, were effectively excluded from participating in the debate.

This, then, is how rules are made in the global so-called "rule-based" system. The rules that are made in the whole agricultural sector is made for the benefit of large food corporations and large trading nations. Thus, for example, subsidies that benefit the big countries (such as for research or for environmental protection) are allowed by the WTO under the so-called "green box" provisions, but subsidies that are badly needed by the developing countries (such as for diversification of the economy) are not allowed under the WTO. The WTO is a highly unjust system. But this is not surprising, for the whole global system, driven by profit and greed, puts the premium of "rule-making" in the hands of those who control the market and the big powers that use their power in the WTO system.

It was for this reason that African countries, as well as other countries of the South, threatened to withdraw their consensus from the Third WTO Ministerial Conference at Seattle in December, 1999. The big powers were trying to make decisions in the so-called "green rooms" without the effective participation of the countries of the third world. If the USA and Europe had managed to work out a deal on agriculture, it is quite possible that they would have taken momentous decisions on agriculture that would have had far-reaching consequences for the well being of the people of the South. It is lucky that the US and Europe could not agree. Nonetheless, Seattle underlined the basic inequity of the system; the way rules are made and enforced on the world's majority of the population without their participation.

There are many other inequities of the WTO system. Take the Disputes settlement system of the WTO. It is supposed to be the flagship of the WTO, but it is inherently weighted against the poor countries of the South. It is an unjust system from beginning to end - from the way rules are made, to the way judges of the Panels and the Appeal court are appointed, to the often arbitrary manner in which the judges apply the rules, to the mechanism for enforcement of the decisions of the panels. Thus, to take the aspect of implementation of the decisions of the panels, if these go against the interest of a big power and in favour of a small country, then there is no way that the small country can have the decision implemented. Why? Because there is no provision in the WTO for collective enforcement of its decision, of the kind, for example, that exists in the Security Council of the United Nations. The only recourse an aggrieved state has is to impose sanctions against the defaulting state by, for example, withdrawing trade privileges to the defaulting state. When, thus, a couple of years ago, the WTO disputes settlement panel ruled in favour of Nicaragua against the USA, Nicaragua could do nothing to make the decision effective. What possible sanctions can Nicaragua impose on the US? And even if it had tried to do so, it would probably have hurt Nicaragua more than the US.

Conditional Poverty Reduction under the IMF and the WTO

The cruel absurdity of the global economic system, ruled as it is primarily by the greed of the transnational corporations, and the power of the powerful, is sustained and enforced by the International Monetary Fund (IMF) and the WTO. The WTO enforces a trade system that is unjust and unfair to the countries of the South, and especially to the poor of the South who have no say in the rule-making or rule-enforcement of the system.

The IMF, on the other hand, is an agency of the powerful countries of the world to go directly into the countries of the South to design policies for them. These days the powerful countries of the North do not have to send their troops to conquer (except in difficult situations like Iraq and Kosovo). They need send only a few IMF experts, armed with laptops, to go and write the macro-economic policies of the countries of the South to effectively control them.

Why do the countries of the South allow this to happen? Mainly because their governments believe, falsely, that they have, in the words of Margaret Thatcher, no other alternative (TINA). The governments of the South, except a few such as those of India, Malaysia, Cuba, and now Zimbabwe and Venezuela, believe that they cannot develop their economies without the help of the industrialized countries of the North.

This dependence on the North is based on false premises. It is based on the premise that domestic capital accumulation is not possible with domestic savings; that it is only possible with the capital investment from the industrialized countries; that this capital will bring growth; and, finally, that this growth will finally trickle down to the poor. There are two major problems with this set of assumptions.

The first is that there is no empirical evidence to sustain any of these assumptions. On the contrary, evidence is more towards the direction of showing that it is not foreign capital that brings growth to the countries in the South, but growth in these countries that attracts capital in order to take advantage of profits that could be made in a growing economy. Thus, it is not surprising that it is China that attracts more foreign capital than, say, South Africa. And in the case of China, what it seeks out of foreign capital is not hard cash, but access to the superior technology of the West. China can earn as much hard cash it wants out of its trading activities; it does not need American dollars to come in through the banking system of China. China imposes hard conditions on foreign companies that want to exploit the Chinese growth market, one of which is to ensure that there is an effective transfer of technology to the Chinese as a price for opening that market.

There is also no evidence also that even where growth takes place there is an automatic trickle down of the effects of growth to the poor. Indeed, all evidence is to the contrary. It is that, if things are left to the market forces, that is if there is no active intervention by the state, then the more the growth, the greater the disparity between the rich and the poor. This is true not just of developing countries, but even countries of the North, such as the United States. The United Nations annual "Human Development Reports" bring out impressive empirical evidence to show that the gap between and within nations have not decreased over time but increased.

So this is the first fallacy of the so-called development paradigm on which the IMF and the WTO operate. The second set of problems with the IMF/WTO model is that they impose conditions on countries that fall prey to their rules. These conditions serve not toi decrease poverty but to increase it. Thus in the case of the IMF, for the last twenty years it has imposed macro-economic policies on countries of the South, such as the Structural Adjustment Programmes (SAPS) which, evidence now shows, have not only not helped these countries but have made matters worse for them, especially for the poor in these countries. For example, one of the conditions of IMF-imposed conditionalities is that the state must reduce its budget deficit and lessen expenditure on social sectors such as health and education. Such conditions have hit the poor in the South such that countries that have adopted the medicine of the IMF are now staggering under the weight of the increased poverty of the masses of their people.

The WTO, in like manner, imposes conditions on its members largely to the benefit, as shown above, of transnational corporations than of the people of the South. The WTO's entire ideological existence is based on the theory that open, liberal, systems are growth-promoting. This is not proven by either evidence or growth. Africa is more open than, for example, the United States or Europe, and yet Africa remains as poor as ever. For the question is not the degree of integration of an economy into the global economy, but the quality of its integration. Rhodesia, for example, was more integrated into the global economy during the colonial days (all its tobacco and mineral were sold in the international market from which it obtained its manufactured products) than even the United Kingdom, which had imperial preferences for the colonies but had all kinds of barriers against the rest of the world. It is how a country is integrated into the global economy, and the role it plays in the global division of labour, that conditions the extent that it can benefit from the liberalization of its economy.

That notwithstanding, the rule of the WTO and the IMF is to impose conditions on countries of the South that come to these organizations to seek their help. Thus, for example, as a condition for giving Mozambique relief on its heavy debt burden, the IMF required it to reduce its tariff on cashew nuts from about 20% to 14%. This had the effect of ruining the cashew nut industry of Mozambique because it could not face the competition of Indian imports, with the result that thousands of workers were thrown out of job. The conditions of the IMF And the WTO do not alleviate poverty; they are, in fact, the primary agencies for creating poverty in countries of the South.

Conclusions

The WTO and the IMF are not isolated instruments of global economic governance. Up to a point, the protest of the people against these institutions, such as at Seattle and in Prague, were legitimate and well-targetted. But it is important to recognize that behind these institutions lie a system of global production and distribution that is underpinned by the market power of large transnational corporations and the war machine of the powerful states. Theories of "development" or of liberalization that are offered by these institutions are essentially serving the interests of these corporations and of the big powers. But the system itself has become pathological and illegitimate. And therefore the resistance against it will daily increase both in the countries in the South and among the people in the North that are sensitive to the inequities of the system and the need to create conditions for a more just global society.

Notes

1) Correa, Carlos M. 2000. Intellectual Property Rights, the WTO and Developing Countries. London: Zed Books

2) The rate at which global bio-diversity is decreasing is one of the worst in the Earth's history, comparable to the "K-T Event" that ended the Age of Dinosaurs sixty-five million years ago with a loss of 76 % of the world's species. According to a study conducted in conjunction with the UN Task Force On Global Developmental Impact, "The planet Earth stands on the brink of one of the most devastating global extinctions in history. By the year 2040, nearly two-thirds of all current species will be extinct. Rainforest habitats that were once lush canopies of life, sustaining millions of highly specialized and interdependent species of plants and animals, have been reduced by upwards of 95 percent in some areas." Because of the interdependent nature of systems like the Amazon, the disappearance of any one species can lead to the death of countless others. "The extinction of the Borneo hooded tern was an indirect result of the disappearance of the native species of sea snails upon which it fed."

3) Ibid.

4) Schumpeter, Joseph A. 1943. Capitalism, Socialism and Democracy. London: George Allen & Unwin.