The New Statesman Essay - The challenge of our age

Clare Short believes globalisation can be harnessed to benefit the world's poor

I have an uncle who is an accountant, coming up to retirement age. He told me recently that one of the joys of his life has been arguing about politics. He is not an active party member, but he has carried Labour's best values with him throughout his working life and always argued the cause. Now he finds that people are no longer interested in arguing about politics.

I do not believe that this situation is a tribute to the Third Way and the hegemony of new Labour; we can see it in the media, the House of Commons and the Labour Party itself. There are still major issues of concern - desperate poverty in the world, conflict in the Balkans and inequality in Britain. But the passion seems to be going out of politics because there no longer seem to be ideological choices.

Some may believe this is attributable to Tony Blair's style of leadership. But it is not exclusively a British phenomenon. The same thing is happening worldwide: in South Africa, for example, the ANC government is as anxious to encourage inward investment and business confidence as the newest of new Labour politicians. The ANC passionately wants to reduce the dreadful levels of poverty and inequality that are the legacy of apartheid. Yet its room for manoeuvre is confined, as is that of all governments, by the need to retain the confidence of the powerful international markets so as to achieve the economic growth needed to reduce poverty.

I think there are two explanations for this profound change in the nature of politics. The first is that we have, over the past 50 years, learnt important lessons about the desirable balance of power between states and markets. Too much state power over the economy leads to economic collapse. This was demonstrated spectacularly ten years ago by the Soviet model, but more quietly in sub-Saharan Africa in the 1980s, when the heavily state-controlled economies there grew more slowly than did the population, leading to an irresistible rise in poverty.

But an excess of markets has been tested to destruction: Thatcherism, Reaganomics, monetarism or neo-liberalism - it has many labels. Until the late 1990s it was the dominant economic model in the world system. It meant minimising the role of the state and allowing markets to flourish. The theory was that although inequality would grow, so would the economy. This would lead to a trickle-down of wealth. Certainly inequality grew in industrialised and developing countries alike, but what wealth was created did not trickle down. This extreme belief in markets is now being rejected as people turn again to the socialist political tradition across the world. The Socialist International now has more member parties that ever before - over 170 and growing, and half of our member parties are in government. This is a major historical opportunity and a considerable responsibility.

The second major explanation for the ideological spark being removed from national politics is the nature of globalisation itself. The major issues of poverty, environment, war, human rights and democracy will be shaped by the international institutions that we put in place. No nation state alone can control these forces. In order to manage globalisation equitably, we need to strengthen and shape the UN, the World Bank, the IMF, the World Trade Organisation and other international institutions. There are massive distributive decisions to be made, but they will be controlled by how we shape our multilateral institutions, not by how we behave as individual nations. This does not mean that national governments do not matter. It is they - on our behalf - who must shape the new international system. Neither does it mean an end of ideology. The ideological questions are now more international than national.

Globalisation is as great a historical shift as was the change from feudalism to industrialisation. When we consider how this earlier shift remade the political and economic landscape of the whole world, we have some indication of the enormity of the changes that globalisation is bringing to our economies and societies.

There is no question that this process is generating new wealth, and that many millions of people across the world are benefiting. There is also no doubt that increased economic interdependence provides an opportunity to lift many of the world's poorest people out of their poverty. However, there is no guarantee that it will do so. Greater economic integration also brings risks. Instability in one part of the world will impact adversely on the performance of economies across the globe - witness the effect of recent economic problems in Asia and Russia. There is also the risk that we will damage the environment by non-sustainable forms of economic growth and that the gap between rich and poor, within and between countries, will grow wider, with a large part of the world's population excluded from the benefits of economic progress.

Global inequalities have certainly grown dramatically in recent decades, as figures from the UN Development Programme show. In 1960, 20 per cent of the world's population living in the richest countries had 30 times the income of the poorest 20 per cent. By 1995, they had 82 times as much income, with a small number of the globe's richest individuals wealthier than some of the world's poorest countries.

Latest estimates suggest that the world's 225 richest people have a combined wealth of over $1 trillion, equal to the annual income of the poorest 47 per cent of the world's people; this in a world where vast - and growing - numbers continue to live in abject poverty. There are an estimated 1.3 billion people - two-thirds of them women - who live on less than 60 pence a day, without access to adequate food, clean water, sanitation, essential healthcare or basic education services.

There is a clear moral imperative to tackle such poverty. We have an irrefutable common interest in doing so. Many of the world's contemporary challenges - war and conflict, mass migration, the violation of human rights, international crime and terrorism, the degradation of the global environment and rapid population growth - are rooted in underdevelopment and poverty.

Promoting sustainable development will help us to reduce poverty and contribute to greater global stability. Progress in development can also provide greatly increased opportunities for trade and investment. And it can help create the conditions for more effective international co-operation to deal with global environmental problems such as climate change, ozone depletion and threats to biodiversity.

This is why it is wrong to talk of globalisation as if it is inherently good or bad. Global economic integration and interdependence are a reality. We cannot recreate a world of insulated national economies or a world in which we can remain immune from events taking place elsewhere. The challenge of our age is to manage this interdependence in a way that is equitable and environmentally sustainable, that maximises the benefits of interdependence and minimises its costs.

One of the most significant changes since Labour's election in May 1997 is the creation of a new government department: the Department for International Development (DfID). Under the Conservatives, the Overseas Development Administration (ODA) was a subordinate part of the Foreign Office, headed by a minister outside the cabinet.

Defined simply, the DfID's task is to work to eliminate abject poverty from the world, and it is forging the necessary alliances internationally to make progress towards that objective. We might equally have defined our role as working across the international system to ensure that the world's poor are not excluded from the benefits that globalisation can bring. The two objectives are one and the same.

In our white paper on international development, published in November 1997, we endorsed the major United Nations poverty eradication programmes. The overall strategy is to commit the world's richest countries to work in partnership with developing-country governments to achieve a number of specific targets. The main target is to halve the proportion of the world's population living in abject poverty by 2015. This means a billion people working their way out of extreme poverty within 20 years. Associated targets include universal primary education; basic healthcare and reproductive healthcare for all; and a commitment to put in place sustainable development plans in every country by 2005.

For many poor countries, making progress towards these targets will require substantial grants or low-interest loans. It is very worrying, therefore, that levels of aid continue to fall across the world. Here in Britain, for 18 years under the Conservatives, aid was consistently cut as a proportion of national wealth. Labour has stopped that downward trend and we have committed ourselves to increasing overseas aid spending by 28 per cent in real terms over three years.

A commitment to increase the quantity of aid needs to be matched by a determination to improve its quality and effectiveness. Over the past 50 years, development assistance has too often been used to further political objectives, bolster cold war allies or facilitate commercial contracts. With the cold war behind us, and with greater clarity about what works in development, there is no longer any justification for misusing aid resources in this way. Here in Britain, Labour has been rigorous in ensuring that aid resources are well spent, in line with our new development priorities. In its most recent review of the UK development programme, the development assistance committee of the OECD praised the UK and described the DfID as "one of the most professional and innovative aid agencies in either bilateral or multilateral sectors".

Ensuring that the world's poor can benefit from globalisation requires a wider set of policy responses. There is a complex web of issues - environmental, trade, investment, agricultural, political and security - that affects the development prospects of poorer countries. Meeting the international development targets depends on implementing these different policies in a complementary way as they affect the developing world. In other words, the needs of the world's poor cannot be treated as an optional extra. Rather, they need to be central to the way in which we approach the management of globalisation and the sort of political and economic institutions and structures we devise for doing this.

That is why action on international debt relief is so important. Many of the world's poorest countries carry heavy debt burdens which are a drain on their economic development. In 1996, the major creditor nations, the World Bank and the International Monetary Fund, agreed to the Heavily Indebted Poor Countries Initiative (HIPC). This was the first serious attempt to address the problem of debt in a comprehensive way, bringing together debts owed to individual governments with debt owed to the multilateral development organisations.

While the initiative has brought benefits to some countries, three years on from the start of HIPC it is also clear that it has fallen well short of its own declared objectives of creating a sustainable exit from unpayable debt for the poorest countries. Debt relief under HIPC proved to be too little, too late, and Labour last year pushed for a fundamental review of the initiative. That review is now under way, and progress has been made. Our aim has been to secure faster, wider and deeper debt relief for those indebted countries that have a clear commitment to poverty reduction and to free up resources for essential investment in health, education and other anti-poverty programmes.

Similarly, on investment issues the objective should be to strengthen the capacity of developing countries to articulate their own interests in investment negotiations and to put in place policies that will help them to attract increased flows of direct investment. Private capital has an absolutely crucial role to play in improving the development prospects of poor countries. And there has been a huge growth in levels of foreign direct investment into developing countries over recent years. But so far those flows of investment have gone to a small number of developing countries.

A commitment to make globalisation work for the world's poor also needs to be reflected in international trade policy. This has been a particular priority for the Labour government. In May 1998, speaking in Geneva at the 50th anniversary celebrations of the General Agreement on Tariffs and Trade (Gatt), Tony Blair committed the government to a free and fair international trading system, but one in which the benefits of increased trade would be more equitably spread. And he pledged to work with developing countries to help them secure their proper interests through the multi-lateral trading system.

The DfID has since been working with the United Nations Conference on Trade and Development (UNCTAD), the World Trade Organisation (WTO), the International Trade Centre (ITC), the World Bank and developing-country governments, to ensure that developing countries can use the WTO to advance their interests more effectively.

But a major aim must be to manage globalisation in a way that is fair and sustainable. For too long the politics of globalisation has lagged behind the economics. If economics is global, then our politics must be global, too. And for that we need an effective international system and greater levels of international co-operation.

There is a curious paradox at the heart of globalisation. While economies and peoples are being drawn ever more closely together, some political forces seek refuge in narrow nationalism and isolation - for example, the right-wing forces in the US that reject America's participation in multilateral organisations such as the UN, the World Bank and the IMF. One strand in British Conservatism is similarly in retreat from international engagement.

But there are also those on the left who seek to turn back the tide of globalisation, who want to put the globalisation genie back in its bottle. They see the IMF and WTO as hostile institutions and want, like King Canute, to rail against the power of global market forces. They fail to remember, however, that the great multilateral institutions were created not by conservatives, but by progressives.

The task today is to strengthen and renew institutions such as the World Bank, the IMF and the WTO and to recast them to greet the new millennium. Labour is closely involved in seeking to strengthen and reshape the work of the United Nations, the World Bank and the IMF. Past World Bank policies often paid too little attention to the social and environmental costs of economic reform. That is changing. And Britain is a major player in World Bank discussions, working with like-minded forces to change the approach of the bank to adjustment and economic reform programmes.

This is a large agenda. But it is the agenda on which a new politics must be constructed and new alliances forged. As a recent Foreign Policy Centre paper on globalisation (David Held et al, 1999) pointed out:

"The challenge of globalisation is ultimately political . . . This means rethinking politics. We need to take our established ideas about political equality, social justice and liberty and refashion these into a coherent political project robust enough for a world where power is exercised on a transnational scale, and where risks are shared by peoples across the world.

"And we need to think about what institutions will allow us to tackle these global problems while responding to the aspirations of the people they are meant to serve."

This is, indeed, the challenge of our age. Our political tradition - working with progressive forces across the world - is well placed to rise to that challenge, to help manage globalisation in pursuit of the common objectives of global peace, sustainable development and social justice.

The author is Secretary of State for International Development