'Development' policies developed by the IMF and other financial institutions are just another weapon to attack the peoples of the world. But there are alternatives for countries that choose to exercise their sovereignty…
Locking countries into capitalist dependency: the EU’s Free Trade Agreements
WORKERS, OCT 2010 ISSUE
There are conspiracies to prevent developing countries from climbing out of their poverty. The unelected, US-run international financial institutions – the International Monetary Fund, the World Bank and the World Trade Organization (WTO) – conspire to ensure the world’s workers and peasants pay debts incurred by their rulers to US and EU banks.
Likewise the European Union, by imposing Free Trade Agreements (FTAs), forces open markets for European goods, thereby preventing development. However, there are alternative models for those developing countries that choose to exercise their sovereignty and pull themselves up independently.
Some 360 million people have died from hunger and remediable diseases in peacetime in the past 20 years, more than died in all the wars of the 20th century. 1,020 million people are chronically undernourished, 884 million lack access to safe water and 2,500 million lack access to basic sanitation. 2,000 million lack access to essential drugs, 924 million lack decent shelter and 1,600 million lack electricity. 774 million adults are illiterate and 218 million children are child labourers.
Roughly a third of all human deaths, 18 million a year, are due to poverty-related causes, easily preventable through better nutrition, clean water, cheap rehydration packs, vaccines, antibiotics and other medicines.
Between 1980 and 2005, the peoples of the South paid $4.6 trillion (equal to 50 Marshall Plans) to the banks of the North. Trade liberalisation has cost sub-Saharan Africa $272 billion in the last 20 years. Poor countries illicitly transfer $1 trillion a year to rich people in the developed countries as well as huge sums to their own corrupt elites. The financial crisis cut the revenues of 56 surveyed low-income countries by $52 billion in 2008 and $12 billion in 2009.
Some 7 million African, Asian and Latin American children die every year due to the burden of debt repayment.
The capitalist states and their international financial institutions promote these avoidable evils of massive poverty: they selfishly push policies that they know harm the poor, robbing the poor while claiming to aid them, to make profits.
In 1985 the World Bank said that in its standard “development” strategy, domestic consumption should be “markedly restrained”, support for education “minimized” and “less emphasis should be placed on social objectives”. Back in 2000, the US National Intelligence Council’s Global Trends 2015 said globalisation would lead to “a widening economic divide” and “deepening economic stagnation, political instability, and cultural alienation”. In law, predictable consequences are evidence of intent.
EU’s Free Trade Agreements
The EU has the largest number of Free Trade Agreements of any major power, with Euromed (9 countries), South Africa, Mexico and Chile. It is negotiating FTAs with India, South Korea, the Andean Community (4 countries), ASEAN (10 countries) and Central America (6 countries).
The EU demands “far-reaching liberalisation of trade in services, covering all modes of supply”. It says other countries’ domestic regulation “must be done in a manner with the least restriction on trade, consistent with achieving other legitimate policy objectives”. The four modes of supply are: 1. the service itself can cross the border; 2. the customer can do the travelling; 3. the firm can set up a branch in the country; and 4. the person providing the service can cross the border to do so.
EU FTAs include matters that developing countries want left out – services, investment, intellectual property, public procurement and competition. The FTAs require developing countries to give access to EU providers of goods and services. But the FTAs never require EU members to cut or end their huge agricultural subsidies – depriving developing countries of access to EU markets for agricultural produce.
These FTAs are just as bad for workers in EU countries, forcing the “free” movement of labour between countries and undermining wages and conditions.
FTAs are even worse for developing countries than the WTO’s General Agreement on Trade in Services. They ban developing countries from attaching conditions to trade like price controls, entry controls, service targets and performance requirements (e.g. using and training local labour, ensuring technology transfer).
The EU has also pressed countries to allow full foreign ownership and board membership of their banks and to put no limits on foreign participation. Increased foreign participation increases capital flows, causing instability and capital flight. It also cuts access to credit for the country’s private sector, especially its farmers, driving domestic firms out of business.
Acting as a bully, the EU threatens to bar market access to Europe unless developing countries sign the proposed agreements. It targets any protection against EU export interests, despite recognising that tariff cuts cause bankruptcies and loss of jobs and revenues in developing countries. By tying developing countries into dependent relations with the EU, the FTAs cut across the development of regional trade blocs based on fairer principles and mutual benefit.
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| Sovereignty and mutual aid, not debt and dependency: Cuban doctors in Haiti. |
An alternative
The international financial institutions are bad for us all. Countries do better when they ignore them. In September 2003, Argentina announced a temporary default to the IMF, until the Fund backed down. The result was rapid economic recovery: Argentina’s economy grew at least 8.5 per cent annually from 2003 to 2007.
Venezuela, Ecuador, Bolivia and Cuba are building alternative and better economic models. Cuba has a life expectancy at birth of 78 years, a 97 per cent literacy rate, and an infant mortality rate of 5 per 1,000 live births (the USA’s is 7 per 1,000). These achievements result from Cubans’ access to free healthcare for everyone and from Cuba having the highest ratio of doctors to people (591) per 100,000 in the world.
Ecuador has protected itself against imports from neighbouring countries with devalued currencies, cutting its trade gap from $7.5 billion to $0.5 billion, boosting production and employment. It provides free universal education and health care and guarantees minimum incomes.
Venezuela and Cuba have created ALBA, the Bolivarian Alliance for the Peoples of Our America. With an initial $1 billion, the Bank of ALBA will fund economic integration, infrastructural development and social, educational, cultural, and health programmes in member countries. Unlike the World Bank and the IMF, ALBA’s Bank will not impose loan conditions and will function on the consensus of all members.
Sovereignty, the ability to control one’s own affairs, is vital to economic development. Economic sovereignty, backed by exchange controls and managed currencies, did better than the decades of Thatcherism under Tories, Labour and now the Coalition. Protectionism brings growth; imposed liberalisation harms growth.
If we had planning, not gambling, as the organiser of the economy, we could end poverty. $296 billion, just 0.66 per cent of global GDP, would take everybody out of poverty. Instead, bank bailouts totalled $20 trillion in 2009 and 2010.
Across the world, most low-income countries are cutting spending. Private banks have failed to respond to public funding by increasing their lending. But in Brazil, public bank lending provides 35 per cent of total credit.
Countries need to increase public spending, especially on infrastructure investment; they need to cut taxes and to subsidise production and consumption (food, fuel, transport, electricity). These measures are forbidden to them by international financial institutions.