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From Poverty to Power: The International System
The document discusses several key issues regarding the international system: 1) The international system must do more to govern global public goods and challenges like climate change, while doing less harm in areas such as trade and arms sales. 2) Global governance has expanded without an overall plan, and ideally would regulate the global economy, redistribute resources, and avert threats, while protecting vulnerable groups. 3) International organizations like the IMF and World Bank were created after WWII but face issues like unequal influence among member states.
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From Poverty to Power: The International System
- 1. The International SystemLecture given by Duncan Green Head of Research at Oxfam GB Notre Dame University, September 2009 Part of a series of From Poverty to Power lectures.
- 2. Main messages Internationalsystem must do more of some things, less of others. This includes: More attention to governance of global public goods and bads, including climate change, migration, taxation, and knowledge ‘ Stop doing harm’ on issues such as trade, arms trade, corruption, climate change Support national development processes, by backing Active Citizens and Effective States Increase democracy and accountability in global institutions themselves
- 3. Global governance growingbut no overall plan. Ideally, role includes: Regulating the global economy Co-ordinating big countries (e.g. via G8) Redistributing wealth, technology, and knowledge Averting environmental or health threats Avoiding/managing war Preventing powerful countries or corporations from harming weaker and poorer ones Protecting the most vulnerable Changing attitudes and beliefs via ‘soft law’ and norms
- 4. World Bank andIMF Born at Bretton Woods, New Hampshire in 1944 as part of new post-war world order (along with UN) One dollar one vote system; Washington v NY Influence rose in 1980s debt crisis, leading to 25 years of adjustment-based lending Failure and eclipse of Washington Consensus, but Bank has changed more than the Fund Washington changed more than ‘the field’ Global crisis has revived fortunes of IMF – funding trebled at April 2009 G20 summit – in return for promises of reform
- 5.
- 6. Finance $3 trillioncrosses borders every day (100 x trade) Finance most volatile form of cross border flow and least suitable for rapid liberalization Financial crises becoming deeper and more frequent, usually followed by massive bailouts, ratcheting up inequality Capital controls can be useful tools, but are being pegged back by new rules (BITs, RTAs) International action is needed to reduce tax evasion/avoidance (DCs lose an est. $160bn per year through tax havens) International taxation (e.g. carbon, arms, Tobin) and global tax institutions could raise $, or agree global floor on corporation tax
- 7. Trade: riggedrules and double standards Prevalent in 5 areas: barriers, subsidies, forced liberalization, intellectual property, and migration Global focus on WTO has hidden growing importance of regional agreements with ‘WTO plus’ clauses Paralysis of Doha Round is a symptom of shift to multi-polar world Trade realities remain more important than trade rules
- 8. Intellectual property: knowledge protectionism IP = patents, copyrights, and trademarks A developed, innovating “North” and a developing, imitating “South” makes knowledge flows crucial Balance between encouraging innovation and spreading knowledge destroyed by TRIPs In 2005, developing countries paid out $17bn in royalty and licence fees TRIPS keeps medicines expensive Biopiracy is widespread Replace TRIPs with an access to knowledge convention?
- 9. Migration A commonand effective response to poverty The last great protectionism (along with knowledge) Those who do migrate face barriers and mistreatment Current remittance flows to developing countries = $240bn – poverty reduction and protection against shocks Objections are often misplaced, but a political minefield Best option: enhanced temporary migration Do we need a World Migration Organization?
- 10. Harnessing the transnationalsPrivileges and powers but few responsibilities Growth driven by changes in business, technology, and politics Concerns include value chains, labour rights, extractive industries, and corruption Good progress at UN and sectoral level, e.g. anti-corruption conventions Disputed progress on ‘corporate social responsibility’ Rise in southern TNCs e.g. in telecoms, mining, forestry, infrastructure
- 11. Aid Born withHarry Truman in 1949 $2.3 trillion since then Successes: Marshall Plan, take-off countries, EU structural funds Altruism, hubris, and self interest Huge public debate: Supporters: Jeffrey Sachs, Paul Collier Sceptics: William Easterly, Dambisa Moyo Turnaround since 2000, but donors backtracking on promises and serious quality problems
- 12. Good v BadAid How can aid support development? Do: fund watchdogs, fund long-term, support state capacity, put government in the driving seat, ensure downwards accountability Measles vaccines save 7.5m lives 1999-2005 Education for All Rise in General Budget Support (but still tiny %) Don’t: overcomplicate, impose conditions, support parallel systems, poach staff or tie aid Over 2 year period, Uganda had to deal with 684 different aid instruments from 40 donors, just for central government funding
- 13. US aid Thepublic thinks it = 30% of the federal budget The reality is 0.6% ($23.5bn in 2006) Good and bad developments in recent years Good HIV (Pepfar) reaching 2m people with ARVs MCC giving budget support to good governments Signs of turnaround on aid volumes (but may not survive recession) Bad Increased focus on war on terror/ national security concerns In-kind food aid
- 14. US aid –a lot of money, but small cf. GDP
- 15. And volume hasbeen falling until start of this decade (debt and HIV)
- 16. And not thatrelated to poverty
- 17. How change happens: the Gleneagles agreement
- 18. How change happens: the Gleneagles agreement 2005 G8 a high point for aid campaigners: leaders agreed to raise aid levels by $50bn by 2010 and deepen debt write-off Despite subsequent backsliding, still an important statement of intent Combination of government (e.g. Commission for Africa) and civil society activism (Make Poverty History and celebrities) Repetition important at G8 (cf. climate change) Tsunami and London bombings were factors
- 19. Dilemma: is aidlike oil? Impact on Policy (conditionality) Institutions (transaction costs, paying the piper) Politics (severing the social contract) How big is the political deficit, and how can good aid overcome it?
- 20. Further Reading fromthe Blog How UK government’s thinking on aid has evolved, http://www.oxfamblogs.org/fp2p/?p=546 The new Papal Encyclical on aid and globalization, http://www.oxfamblogs.org/fp2p/?p=444 Successful aid in Nepal, http://www.oxfamblogs.org/fp2p/?p=298 Dambisa Moyo and the aid sceptics, http://www.oxfamblogs.org/fp2p/?p=273 US aid reform takes off, http://www.oxfamblogs.org/fp2p/?p=266
- 21. Further Reading andLinks From Poverty to Power , Part 5 On Trade Ha-Joon Chang, Kicking Away the Ladder (2001) On Aid Jeffrey Sachs, the End of Poverty (2005) William Easterly, White Man’s Burden (2006) Paul Collier, the Bottom Billion (2007) http://www.reformaid.org
Editor's Notes
- #3 Photo: UNA-San Diego
- #4 Photo: Craig Owen/Oxfam
- #6 Photo: Aaron Mallett http://www.abc.net.au/news/stories/2008/04/15/2217414.htm
- #7 Photo: Aaron Mallett By one calculation, banking and financial crises have wiped 25 per cent off the economic output of developing countries over the past 25 years. ‘ Citizens’ confidence is measured every four years with an election. The market measures business confidence every four seconds.’ Brazilian academic, Marcus Faro de Castro ‘ Transfer pricing’ involves under- or overcharging for trade within different company affiliates in order to minimise tax. One study revealed companies recording internal transactions of TV antennas from China priced at $0.04 and Japanese tweezers priced at $4,896.
- #8 Photo: Renato Guimarães/Oxfam Taxpayers provide a mere 25,000 US cotton farmers and corporations with annual subsidies of up to $4bn, resulting in overproduction and dumping on world markets that cost ten million poor farmers in West Africa between 8 per cent and 20 per cent of their income An average of two bilateral investment treaties are signed every week. Most alarming among the EU’s bilateral and regional negotiations are the Economic Partnership Agreements (EPAs) with former colonies in Africa, the Caribbean, and the Pacific.
- #9 Since 2001, for example, competition among Indian generics producers has driven down the cost of first-line antiretroviral medicines from $10,000 per patient per year to the current level of less than $100 per patient per year. Thailand’s decision to issue a compulsory licence for its second-line HIV medicine Kaletra prompted Abbott Pharmaceuticals to de-register seven new medicines from the Thai market. Abbott was charging patients nearly $2,200 per year for the drug. Biopiracy: in 1995, when two researchers from the University of Mississippi Medical Center were granted a US patent for using turmeric to heal wounds, an art that has been practised in India for thousands of years. To get the patent repealed, the claim had to be backed by written evidence – an ancient Sanskrit text Similar patent disputes have broken out over attempts by US firms to patent basmati rice (a tasty variety perfected over generations by Indian farmers), ayahuasca (an Amazon rainforest plant sacred to Colombia’s indigenous peoples), the neem tree (an Indian plant traditionally used to produce medicines and pesticides), and extracts of black pepper. In 2005, the Peruvian government accused Japanese scientists of trying to patent the extract of camu-camu , a pale orange fruit found in the Amazon that has the highest concentration of vitamin C of any known plant, 60 times greater than lemon juice.
- #10 Photo: Tomas Castelazo When Ecuador suffered an economic crisis in the late 1990s, thousands of people left the country, many for Spain, and remittances rapidly expanded to 10 per cent of GDP – a vital lifeline for a country in crisis. Without immigration, the Spanish economy would have stagnated over the past five years, and in 2005 immigrants paid in €5bn more in taxes than they received in services
- #11 In 2007, Wal-Mart’s sales came to $345bn, more than the GDP of all 49 least developed countries put together, or of major economies such as Saudi Arabia, Poland, or Indonesia. All told, the universe of transnational corporations (TNCs) now spans some 77,000 parent companies with over 770,000 foreign affiliates. In 2005, these foreign affiliates generated an estimated $4.5 trillion in value added, employed some 62 million workers, and exported goods and services valued at more than $4 trillion. Corruption : World Bank figures suggest that $1 trillion in bribes is paid annually by international companies to secure lucrative deals. In the USA, pharmaceutical companies spent $759m to influence 1,400 Congressional bills between 1998 and 2004, and they employ 3,000 lobbyists
- #12 Aid’s most tangible successes have been in health, where vaccinations have eradicated smallpox and have saved 7.5 million lives from 1999–2005 simply by halving deaths from measles Malawi: With 90 per cent funding from the UK and the Global Fund to Fight AIDS, Malaria and Tuberculosis, Malawi’s Ministry of Health increased salaries by 50 per cent for 5,400 existing front-line health workers, recruited 700 new health staff, expanded and improved training schools and trainers, and plugged critical gaps with expatriate volunteers. ‘ In 2003, resignations of nurses were at one or even two a week. It was shocking,’ said Dr. Damison Kathyola, director of Kamuzu Central Hospital in the Malawian capital Lilongwe. ‘Since we introduced incentives, we’ve somehow stemmed it to one or two a month.’ Quality: a proliferation of international ‘ financing mechanisms’, including 90 global health funds set up to address specific diseases or problems. Uganda has over 40 donors delivering aid in-country. Government of Uganda figures show that it had to deal with 684 different aid instruments and associated agreements between 2003/04 and 2006/07, for aid coming into the central budget alone. St. Vincent (population 117,000) was asked to monitor 191 different indicators on HIV and AIDS
- #18 Photo: Kieran Battles/Oxfam
- #19 Photo: Kieran Battles/Oxfam
- #20 Photo: Kieran Battles/Oxfam