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  1. Politics
22 May 2000

How Clare Short fails the poor

The International Development Secretary says free trade can reduce global inequality. Even World Ban

By John Madeley

She used to be the darling of the left, saying the things it loved to hear. Now her views on globalisation are the left’s despair, sounding more Tory than socialist, and not even Third Way. Whatever happened to the Secretary of State for International Development, Clare Short?

Whether or not her department has cut aid to crisis-hit Mozambique and Ethiopia depends very much on how the figures are interpreted. What is not in dispute is Short’s unbending claims of the benefits of economic globalisation for the world’s poor. Just before last month’s meeting of the International Monetary Fund and World Bank in Washington, she accused opponents of globalisation of “not living in the real world”.

“Globalisation is generating great wealth,” she told the World Trade Organisation (WTO) meeting in Seattle last November. “This could be used to massively reduce poverty worldwide and to reduce global inequality.”

Well, perhaps it could be so used, but there is no evidence that it has been, or ever will be. The opposite is the case. There is now overwhelming evidence that economic globalisation – the world as a single market without barriers to trade – damages the poor and widens inequalities. The wealth produced goes to the already wealthy.

Liberalisation leads to more food imports to poor countries, but not to more exports. Peasant farmers go out of business because they cannot compete with imported food. Transnational corporations take over their land, forcing the farmers into the cities. Poverty and malnutrition rise. Short often quotes Bangladesh as an example of a globalisation success story, with growth now averaging 3.5 per cent a year, against 2 per cent from 1985 to 1995. People on the spot tell a different story: the wealthy get wealthier while the villages become increasingly desperate. On the other side of the world, Cuba is poor, but at least its small farmers are still in business: cereal production has almost doubled since the mid-1990s. But that’s because it “suffers” from a US trade embargo.

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Africa provides the most striking example of the effects of globalisation: income per person grew by a third between 1960 and 1980, but fell by a quarter in the succeeding decades, as liberalised trade and investment grew. In Latin America, income per person grew by 73 per cent between 1960 and 1980, and then by less than 6 per cent between 1980 and 1997. Only in parts of Asia – South Korea, Taiwan, Indonesia and China, for example – has there been any dramatic reduction in poverty. But these countries have made extensive use of trade restrictions and government economic intervention. “They opened up their economies to trade, but under their own terms,” says Barry Coates, the director of the World Development Movement.

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There is ample evidence for all this from the studies of non- governmental organisations (NGOs), but Clare Short does not need to take their word for it. The most devastating indictments of the effects of trade liberalisation have come from the World Bank.

One recent World Bank paper (“The simultaneous evolution of growth and inequality”, by Mattias Lundberg and Lyn Squire) finds that greater openness to trade is “correlated negatively” with income growth among the poorest 40 per cent of the population, but “strongly and positively” with income growth among the remaining 60 per cent.

These results – based on a sample of 38 countries between 1965 and 1992 – are both “strong and striking”, say the authors. The costs of adjusting to more free trade “are borne exclusively by the poor, regardless of how long the adjustment takes”. The study results suggest “that there is no single policy which advances both greater growth and greater equity simultaneously”. The authors report a strong correlation between an equitable distribution of land and increased prosperity among the poor. Globalisation, almost inevitably it seems, takes developing countries in the opposite direction, concentrating land in fewer hands.

In another World Bank paper, Branko Milanovic finds that the internationally accepted Gini coefficient of inequality – which ranges from 0 for complete equality to 100 if all income is received by a single person – rose from 63 in 1988 to 66 in 1993.

In other words, as John Kenneth Galbraith puts it: “Globalisation is not a serious concept; we have invented it to allow for the politics of economic entry into other countries.”

Take a company such as Cargill, the world’s largest agricultural corporation, whose chief executive once boasted that, when we get up from the breakfast table each morning, much of what we have eaten – cereals, bread, coffee, sugar and so on – has passed through its hands. “Cargill’s goal is to double in size every five to seven years,” says Brewster Kneen, the author of a book on the company. Cargill can only do this by taking over land now farmed by smallholders. Globalisation helps it to do so.

Missing from Short’s analysis is any recognition that it is companies, not countries, that do the trading. In truth, “free trade” does not exist; rather, we have “corporate managed trade” as the consumer rights activist Ralph Nader calls it. He points out that the agreement to set up the World Trade Organisation runs to over 20,000 pages. “If you have a free trade agreement,” he says, “all you need is one page saying no more tariffs, no more quotas. But that’s not the economic design the global corporations have in mind. They want international patent monopolies, for example, on medicines, seeds, flora and fauna, etc.”

Patents on life forms, such as seeds, are allowing corporations to own the traditional knowledge of peasant farmers. The corporations have seen to it that their interests are protected and promoted. The poor have no such protection. Peasant farmers are left to swim in the same stream as the corporations, and have about as much chance as a schoolboy put into the same boxing ring as Mike Tyson.

The internationally agreed target is to halve the numbers who live in extreme poverty by 2015. But enormous change is needed to achieve that. One definition of extreme poverty is living on less than a dollar a day and, at 1.2 billion, the numbers at this level are unchanged since 1987. Given inflation, a more reliable definition may be less than two dollars a day – and, at this level, according to World Bank estimates, the numbers have actually increased, from 2.55 billion to 2.8 billion (almost half the world’s population).

What would make a difference? Most developing countries want to take measures to encourage their farmers to grow more food and to give their own companies preference over foreign competitors. WTO rules forbid both.

Globalisation is a policy choice, not an inevitability. “At least in part,” argues Rubens Ricupero, the director-general of the UN Conference on Trade and Development, “it is a work of deliberate construction.” It needs to be challenged for playing straight into corporate hands.

What is needed is the deliberate construction of a system that encourages alternatives, that allows countries the right to take measures to protect their economies and their most vulnerable people, that regulates rather than bows to transnational corporations, and that develops into a more humane international economic order which can genuinely help to alleviate poverty. Short should stop singing the praises of globalisation and turn her attention immediately to how that system can be achieved.

The writer’s Hungry for Trade (£9.95) is published by Zed Books in September